EU-USA trade war: will US apparel companies delocalise?

The US government has imposed customs duties on aluminium and steel imported from Canada, Mexico and the EU, and the American Apparel and Footwear Association (AAFA) now worries about the damage that European retaliation could wreak on US textile industry products and jobs.

Emmanuel Macron and Donald Trump - AFPIn response to the newly introduced US import duties, the EU is planning to levy a 25% tax on some American products, including men’s and women’s jeans, t-shirts, shorts and a host of sport equipment and apparel. And while the new US customs duty will directly affect, within the apparel sector, local manufacturers of buttons and zips, the EU measures could especially hurt textile manufacturers in California, a hub for denim production.

US manufacturers remember how a commercial dispute with Europe five years ago saw duties on denim products rise from 12% to 38%, costing €210,000 in six months to Los Angeles-based factories. A situation which led True Religion, 7 for All Mankind, Hudson and several other brands to delocalise part of their manufacturing operations to Mexico. According to the US Department of Commerce, last year the USA exported €583 million worth of apparel to the EU, down from the figure of €608 million in 2014.

“Let’s be clear about it, Made-in-America clothes and shoes will suffer from these decisions by the Trump administration,” said Rick Helfenbein, Executive Director of AAFA, which ranks among its members major groups like VF Corp, PVH, Lululemon and Tapestry. “Our capacity to export products is essential for the health of our manufacturing industry. These [measures] will be detrimental for US corporations and workers. It is important to note that customs duties [on steel] are a hidden tax levied on US consumers. They will set off price inflation and undermine the creation of new jobs. New barriers will not create new opportunities for Americans.”

AAFA’s misgivings about President Trump’s protectionist intentions is nothing new. They had been voiced ever since the presidential campaign, when Trump announced he wanted to end the commercial agreement which linked to USA to Canada and Mexico.

At the end of May, AAFA published a letter signed by 60 US labels (among them Abercrombie, Kate Spade, Levi Strauss, Macy’s, Nike and Under Armour) arguing against increased taxation of Chinese textile and apparel imports to the US. It was a direct response to the US’s National Council of Textile Organizations’ demand that Congress add Chinese textiles to the list of products on which Washington is considering applying a 25% import duty. Something which the AAFA regards as a tax in disguise imposed on US importers.